Citizen’s Guide to Canadian Taxes

In one year, the average Candian paid about $5,800 in taxes.

If you’re in Canada and not sure how the taxation system works, you’ve come to the right place. 

Keep reading, and we’ll break down all you need to know about Canadian taxes and how to file them!

Income Tax

Every Canadian has to file their income tax return each year. However, you’ll have to figure out what residency classification you’re in.

The Canada Revenue Agency (CRA) will consider you a Canadian resident if you’ve established strong ties in Canada. For example, having your home, a spouse, or children there classifies you as a residence. You may also have a social insurance number or a Canadian driver’s license. 

Sometimes the CRA will also call you a resident if you spend more than 183 days per year in Canada. If you have less than that but still have strong ties to your origin country, you’d be considered a non-resident. 

However, to avoid paying taxes twice, Canada has made agreements with many countries to make sure that you only pay taxes in one of them. 

If you are a resident and have a spouse, you will both have to file your income separately. If you both have children that are earning an income, your child will also have to find a separate return. 

The deadline to file these taxes is April 30th. If you miss that deadline, you could have to pay a fee of 5%. However, to avoid that, you can file them around mid-February. Many people prefer to do this so that they can avoid having to find a tax agent who is busy with everyone else. 

If you also have investments, such as stocks or cryptocurrency, and make a profit, you may have to put that on your income as well. To learn more about that, check out this article: “What Are The Laws Governing Bitcoin Tax In Canada?“.

Sales Tax

Every Canadian also has to pay sales tax on anything they purchase. Depending on the province that you’re in, you could also have to pay goods and services tax, provincial sales tax, or a harmonized sales tax. 

A harmonized sales tax is a combination of goods and services and the provincial tax. For example, Ontario has a 13% HST tax. Prince Edward Island has a 15% HST tax rate, as does New Brunswick and Newfoundland and Labrador. 

However, if you’re in a province like Quebec, you’ll have to pay a 9.975% sales tax on retail prices. There’s also an automatic 5% goods and services tax on top of that. 

There are only four provinces that currently don’t have above a 5% sales tax on goods and services. Those are the Nunavut, Yukon, and the Northwest Territories. 

Keep in mind that when you pay sales tax, the tax is not refundable if you’re a Canadian citizen. 

Healthcare Taxes

As a Canadian, you’ll have to pay healthcare taxes for socialized medicine. Under this type of plan, everyone has the same access to go to a medical facility or have procedures done with no extra cost. 

While you have to pay these taxes throughout the year, there may be some additional steps to take when it comes time to file your taxes. 

Federal Income Tax

You should also figure out what bracket you’re in. In Canada, the range can be anywhere from 15% to 33%. For example, if you make $47,000, you’ll only have to pay 15% of tax.

If you make more, you’ll have to pay a higher tax. However, unlike in the United States, lower-income earners have a much lower tax rate so they can afford to pay their bills. 

How to File Taxes

Now that you know the basics, you’ll have to figure out how to file your taxes. Thankfully, there are three different ways that you can choose to file your taxes. 

The first is to mail in a paper copy. The CRA should send you your income tax package at least by the end of February. If you don’t get it, you can always go online to view and download your form. They’re normally available sometime in January. 

If you would rather do everything online, you can also file your taxes there. The CRA has an online filing site called NETFILE. You can access this on your computer, tablet, or phone. 

You’ll find prompts on there which will make it really easy to submit your taxes. There are also some features of this that lets you save as much money as possible. It’ll ask you some questions about your questions to see if you’re eligible for any tax deductions that you may not have been aware of. 

If you aren’t comfortable with doing it online, you can also call the CRA’s automated phone service. It’s called File My Return, but you’ll also need a letter inviting you to file your taxes this way.

Normally people are invited if they have a fixed or low income. However, some people in a higher tax bracket could be eligible for it if their taxes are similar to how they were in the previous year.

Learn More About Filing Canadian Taxes

These are only a few things to know about filing Canadian taxes, but there are many more things to keep in mind.

We know that filing taxes no matter where you are can be stressful and overwhelming, but we’re here to help you out.

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